OMOs to be conducted subject to liquidity: Gokarn

Deputy Governor of RBI Subir Gokarn today said he would not rule out conducting open market operations (OMO) subsequent to the central bank's slashing the cash reserve ratio by 0.5 percentage point to 5.5%.

"We don't rule out conducting OMOs in future and it will depend upon the liquidity situation in the system," Gokarn told reporters here after the monetary policy review.

He also said OMOs are being conducted to ease liquidity deficit in the system and not to support yields.

The central bank had infused Rs 70,000 crore into the system in the last three months after the average daily borrowings under the Liquidity Adjustment Facility (LAF) touched Rs 1.2 lakh crore in the recent past, which is way above the RBI's comfort level of Rs 60,000 crore.

Referring to the rupee, Gokarn said that the central bank was not looking at any level and it would like the currency to float based on demand-supply dynamics.

He also said that it was looking into the possible impact on inflation after the implementation of the proposed Food Security Bill.

"We are now studying the impact of the proposed Food Security Bill on inflation and it's difficult to ascertain its effect on inflation as of now," Gokarn added.